In response to its discussion paper, Preliminary views on amendments to IAS 19 (pdf 53.31kb), the International Accounting Standards Board (IASB) has published an exposure draft setting out proposed amendments to the IAS 19 employee benefit accounting standard.
The aim of the proposed amendments is to clarify for those using financial statements how defined benefit plans affect a company’s financial position and to allow comparison between different companies. One amendment requires companies to recognise pensions gains and losses in the financial period in which they occur, thus preventing “smoothing” whereby annual surpluses and deficits are spread over a number of years in order to give the impression of consistent returns. The IASB also recommends increasing disclosure requirements, particularly in relation to the risks associated with defined benefit arrangements and involvement in multi-employer schemes.
However, there have been warnings from accountants and actuaries that the changes may distort company profits.
The consultation period ends on 6 September 2010 and the IASB plans to finalise the amendments to IAS 19 in mid 2011.
View the exposure draft. (pdf 132.41kb)